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The BBC's decision to outsource a major digital technology project to Siemens has been criticised by a public spending watchdog, which said the corporation needed to be "more vigilant" with licence fee-payers' money.

The BBC's Digital Media Initiative aimed to make it easier for journalists and programme staff to handle audio and video material. The contract was initially given to Siemens but later cancelled when it was not delivered on time. It was forecast to cost £81.7m but this has now grown to £133.6m.

The Public Accounts Committee said in a report published today that, with hindsight, the BBC should not have awarded the deal to Siemens without testing it against other suppliers.

The committee heard evidence from senior figures at the corporation including director-general Mark Thompson.

Committee chairman Margaret Hodge said: "The BBC has made good progress in delivering its Digital Media Initiative in-house since it terminated its contract with Siemens. It is now on course to deliver the complete technology by summer 2011.

"We welcome the Trust's assurance that it would now take a more challenging approach when considering procurements.

"We are concerned with the ease with which the BBC found over £50 million in savings to make up for the losses it suffered through late delivery of the project and its own increased delivery costs. This suggests the need for a more vigilant approach to value for money."

A BBC Trust spokeswoman said: "We will consider all the committee's recommendations very carefully.

"The Trust has set a very clear and challenging efficiency target for the BBC as a whole, which it monitors year on year.

"In addition, this year we have commissioned the National Audit Office specifically to carry out a study on the progress made by the BBC against its five-year efficiency programme."

A BBC spokesman said: "DMI is a cutting-edge technology project which will carry long-term creative and financial benefits and transform the way we make content in the future.

"The BBC agrees with the NAO that the first phase of the project did not go according to plan. However, the NAO report shows the project is now progressing well, having been brought under BBC management after a rigorous financial assessment, and is already being successfully implemented into the business.

"Importantly, costs arising from delays to the project have not been borne by the licence fee-payer.

"We fully agree with the NAO's recommendations for effective oversight of contracts, processes and controls, many of which have already been implemented."

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